Systems that facilitate the payment of bills are well known. While these systems utilize a variety of components to implement a number of different procedures, they all possess some drawback that limits the flexibility of the system. To understand these various systems and their limitations, an explanatory background discussion is helpful.
Bill payments usually involve at least two parties, a payor and a payee. A payee is a person or entity that receives cash, government tender or other acceptable tender from a payor, to satisfy a bill for goods, services or obligations rendered or to be rendered to the payor or other persons. Obligations may be any type of debt owed to another and include such items as voluntary payor donations. A payor is the person or other entity that provides the funds or tender for such bill payment on behalf of itself or others. A bill may be presented at regular or irregular time intervals, may be oral or in a written format, and may take the form of a voluntary or involuntary obligation.
In most situations, the payee has the responsibility to determine the amount and due date for payment of a bill. Voluntary donations and bill payments of this nature are typical exceptions to this rule. If a bill is presented in written form it is also usually the responsibility of the payee to provide for delivery of the bill to the payor. This can be accomplished either directly between the payor and payee or indirectly through such third parties as the postal service. Once a bill is delivered to the payor it is usually the responsibility of the payor to deliver payment to the payee. This process usually involves one or more third parties. For example, if a check is deposited with the postal service it is delivered to a payee which relays it to a bank and the banking system is used to collect the payment. In its simplest form bill payment consists of the payor personally presenting cash to the payee.
Bill payment may be classified into two very general categories, positive and negative. Positive bill payments require the payor to “do something” or take a positive action before bill payment is performed. For example, positive action includes such methods as delivering cash or checks to a payee or authorizing payment of a bill by a third party by using a personal computer or telephone. Positive payment systems also include those in which a payor specifies a payment action on one date which is implemented on another date. Negative action or negative bill payment requires the payor to “do nothing” in order to pay a bill. In other words, the payor does something to “stop” a bill from being paid. Each category may be further divided into the additional sub-categories of single payee and multiple payee. Single/multiple payee category status is usually determined from the perspective of the payor. Positive pay systems, operated by a third party, are usually associated with multiple payees. Negative pay systems are usually associated with a single payee. Each of these sub-categories may be further sub-divided into additional categories such as electronic/paper, fixed/variable, provisional/final and partial/full.
The electronic/paper sub-category is usually used to define a system that principally utilizes electronic data messages to transfer funds while paper systems typically use written instruments for this purpose. The fixed/variable sub-category usually refers to whether the amount of the bill is fixed or varies for each billing cycle. Provisional/final sub-category typically indicates whether the payment action by a payor may be reversed after payment is tendered. Finally, the partial/full sub-category defines whether the payor may submit less than the full amount of the payee's bill.
Positive Action Bill Payment
The traditional positive action bill payment situation occurs where the payor, after becoming aware of the contents of the bill, takes positive action to pay the bill by mailing payment documentation back to the payee along with a check, money order, or other payment instrument, by paying the bill in person at the payee's facilities, or by paying the bill in person at an appropriate financial institution or other third party agent of the payee. Regardless of the method, the payor is required to take positive action to pay each bill, even if the bill is for the same amount and it recurs month after month. Positive action bill payment has a number of disadvantages, including its labor intensive nature resulting from the various manual processes and procedures a payor performs to implement it and the relatively high costs in invoice preparation, delivery, check charges, and check clearing processes for the payee.
Other positive bill payment arrangements have been directed toward addressing some of the above mentioned disadvantages. One such arrangement includes utilizing bills and invoices which comprise a detachable stub portion, which, when returned to the payee, may be used to initiate an electronic funds transfer. Such systems have been implemented in certain European countries as a single document billing/bill paying procedure, however, these documents often do not provide the payee with a negotiable instrument upon receipt, and generally do not meet the requirements of the check clearing processes of the Federal Reserve System in the United States. Such systems and related single document financial data processing procedures are described in U.S. Pat. No. 5,121,945, which issued to E. Thomson et al. on Jun. 16, 1992.
In the Thomson et al. patent, the disadvantages of the European type systems are overcome with a single document described as being generated by the supplier of goods or services which includes a bill, a maintenance section (to allow for payment changes or to select an option among conventional payment methods), and a pre-printed check which may be utilized by the payor as a fully qualified negotiable instrument for payment of the debt. To pay a bill, a payor simply signs the check and returns it to the supplier, without writing a separate personal check or implementing other alternate payment procedures. However, this system requires positive action by the payee to present each bill to a payor and requires action by the payee to initiate bill payment. This system follows relatively standard check payment and clearance procedures once the instrument is directed to the payor's financial institution. The patent teaches the use of such a system with a single payee.
In an effort to further address these limitations, various financial establishments have provided their customers with the option of paying variable and fixed bills electronically. These systems are typically positive action systems in which the customer usually initiates payment by communicating with the system via an authorized automated teller machine (ATM) or telephone. Systems that permit a payor to authorize payment on one date through such communication with the actual payment being performed on a second date are still classified as positive systems because the payor must take action to pay each bill. Typically, a system of this type requires that the payor's and payee's financial institutions communicate with the system. Some ATM bill paying systems have required that the actual bill be supplied to the payor by the payee to ensure proper payment. Telephone bill paying systems are somewhat more automated but still require the payor to enter through a telephone keypad or computer keyboard most of the critical billing information such as payor identification, bill amount, payee code or account number, etc. While these systems offer a payor access to multiple payees and may facilitate bill paying by debiting a payor's account and crediting the appropriate payee's account, the payment mechanisms require substantial human interaction for each bill. This interaction is required for each bill presented in each billing cycle, even if the obligation represented by the bill is a fixed recurring debt. While these systems may permit a payor to cancel a bill payment action entered by a payor within a predetermined waiting period, these systems do not permit a payor to reverse a bill payment once processing of the bill payment action has commenced.
Other positive action bill payment schemes have been developed whereby a subscriber (i.e., payor) obtains special communications devices and/or hardware to pay bills electronically from the payor's home. Such user initiated remote access systems include CheckFree, a personal computer based bill paying service available from CheckFree Corporation of Columbus, Ohio, and On-Line Banker Service offered by On-Line Resources, Ltd. of Washington, D.C. Other similar services are mentioned in the background section of U.S. Pat. No. 5,283,829, which issued to M. Anderson on Feb. 1, 1994.
The Anderson patent describes billing equipment which generates a bill with a unique approval number. Once a subscriber receives the bill, he or she may approve the payment via an interactive voice response unit by using the unique approval number for that particular payment. This procedure, however, requires the service or goods provider (i.e., the payee), to use specialized equipment to generate each invoice with its unique approval number. The subscriber then positively initiates each particular payment in a manner similar to the electronic funds transfer procedures of various other systems previously available, with the exception that sensitive account numbers or other personal information are not required to implement payment of the particular bill. Similarly, the On-Line Resources method and system mentioned above for remote distribution of financial services is described in U.S. Pat. No. 5,220,501 as a positive payment system, wherein the user must input payment information for each particular debt to be paid.
Finally, U.S. Pat. No. 4,484,304, which issued to R. Anderson et al., describes a transaction execution system similar to a variety of automatic teller machine (ATM) networks which allow for remote banking, including payment of particular bills and invoices of participant payees. While the Anderson et al. system appears to offer an alleged improvement to conventional ATM networks by allowing multiple financial institutions to use the same host and remote terminals, it suffers many of the same shortcomings of other prior systems, including a requirement that specific payments must be manually entered by the user. There is also no provision for reversal of payments after they have been made.
Although there have been certain variations on the positive action bill payment procedures and systems, these arrangements still require the payor to take positive action to initiate payment of the bill even if the payor receives such a bill from the payee each month. In addition, positive action bill payment systems are cumbersome, costly, and inconvenient because manual processes are usually required to pay each bill. Nor do most of these systems empower the payor to manage the time for or amount of payment of bills including the reversal of payments previously made.
Negative Action Bill Payment
In a single payee negative action bill payment arrangement, the payee usually gets authorization directly from the payor to automatically debit the payor's account at the payor's financial institution on a periodic basis (e.g., monthly) for the payee's fixed bill amount or possibly a variable bill amount. For example, some insurance companies offer to automatically debit the payor's account at the payor's financial institution for the payor's monthly insurance premium payment. This automatic debit is usually accomplished through the Automated Clearing House (ACH) processes, or similar processes, which generally comprise a computer-based clearing and settlement operation often operated by a Federal Reserve Bank, and whose purpose is the exchange of electronic transactions among participating entities. As seen in the above example, the payor's insurance premium is automatically paid each period and the payor takes negative action, or no action, to pay such a bill. However, these systems require the payee's financial institution to generate the electronic funds transfer (EFT) debit messages to initiate bill payment. The payor's financial institution receives the debit message via the ACH and verifies whether the payor's authorization is still active as well as whether the presented debit message conforms to the payor authorized parameters. This procedure is performed for each bill presented for each billing cycle.
Additionally, these single payee negative action bill payment arrangements are typically offered by the payee (or the payee's agent on behalf of the payee) to the payor directly, and therefore the payor deals with each individual payee in order to receive such service. Disputes or problems regarding payments are handled directly between the payor and each applicable payee.
While this arrangement only requires payor action for the initial authorization to pay the payee debit messages, its acceptance in the industry has been unspectacular, as payors recognize that their control of the timing and amount of the payment is often forfeited in exchange for the need to respond to bills presented by each payee. For example, many of these systems have no flexibility regarding the payor's ability to determine when the bill is paid, and the payer is relegated to conforming to each individual payee system's predetermined dates and times for payment. Moreover, the payor has little or no control over each periodic payment, other than to completely terminate the bill payment service with the payee. In addition, other than to initially authorize a bill payment amount, the payor cannot change or alter the amount of the payments. In addition, there is usually no way for the payor to independently reverse a payment that has already been made without the cooperation and/or permission of the payee. Due to the relatively low acceptance of these systems, the fees generated by the number of participants and the corresponding volume of message traffic in such systems are also relatively low and the overall costs are higher. An example of a common electronic funds transfer system is disclosed in U.S. Pat. No. 4,823,264, which issued to G. Deming on Apr. 18, 1989.
A modification of this negative action system is to have a third party provide the debit messages from multiple payees to multiple payors. In this type of system, the payor usually authorizes the third party provider to automatically debit the payor's account at the payor's financial institution on a periodic basis (e.g., monthly) for a payee's fixed bill amounts. The provider also establishes a recurring data file of fixed payment amounts along with a corresponding payment date for each bill of each participating payee. Such systems are used to make recurring fixed payments such as preset mortgage payments, installment loan payments, leasing payments, or the like. This automatic debit is usually accomplished through the Automated Clearing House (ACH) processes, or similar processes, as described above. Like the systems described above, the payor's bill is automatically paid each period and the payor takes negative action, or no action, to pay such bill. However, such systems still suffer the limitation that payors do not exert control over payment of the payee bills after the initial authorization and payees do not modify the recurring data file without the use of manual processes by the third party provider.
Financial industry acceptance of these fixed negative action systems has been unspectacular for many of the same reasons cited above. These systems do not accommodate bills or debts that vary in amount from month to month based upon customer usage and the payees in such a system often have to be financial institution accounts (e.g., mortgage loans, installment loans, leasing account, etc.) and may also have to be at the financial institution which is the provider of the payment arrangement, thus further limiting the convenience and applicability of these options.
Similar to negative action bill payment arrangements, a variety of other accounting and automated fund collection systems have been available in various forms, such as shown and described in U.S. Pat. No. 5,222,018 (which issued to M. Sharpe et al.) and U.S. Pat. No. 5,111,395 (which issued to R. Smith et al.). The M. Sharpe et al. system for centralized processing of account and payment functions is directed to a procedure for determining an accounting for costs of shipping transactions. The system maintains a database for participating shippers and carriers and debits and credits the shipper and carrier accounts in order to keep track of shipping services requested and delivered. Periodically, the system issues statements of accounts receivable to the carriers and statements of accounts payable to the shippers. This accounting system thereby is directed to simplifying accounting for a relatively large number of transactions which can be reported in periodic statements of accounts to be settled between the carriers and shippers.
The R. Sharpe et al. system allows the shippers to maintain funds with a predetermined trustee bank, so the central processing center of the system may issue instructions to that bank to appropriately debit the shippers' accounts and issue payment to carriers accordingly. The actual payment is made in a traditional manner through the trustee bank, such as through electronic fund transfers and the like. While this system does provide for simplified accounting and account tracking procedures, it includes deficiencies similar to other systems described above in that it lacks provisions for the shippers to control the timing of payments, modification of billing payment amounts, and/or reversal of payments after they are made.
Consequently, while a variety of bill payment systems directed to positive/negative, single payee/multiple payee, and interactive systems and methods, have been provided in various forms to address shortcomings for general billing and bill payment procedures, these systems and methods have suffered from significant drawbacks of inconvenience, high costs, lack of universal applicability and acceptance by payors, lack of flexibility, and lack of control over payment amounts and payment timing by the payors. Many previously known systems are limited in that they require positive action by the payor to implement payments, are available only for certain types of bills and debts of predetermined amounts, require implementation of specialized equipment by individual providers of services and/or goods, rely solely upon Federal Reserve Bank ACH systems to accomplish payments between various financial institutions, and/or compromise the payor's ability to control payment amount, timing or reversal of payment, or access to information regarding the current status of upcoming or previous payments.
Given such disadvantages of currently available bill payment procedures and systems, there is a need for a payment system that reduces the payor's time spent in paying bills, reduces the cost of paying bills, increases service, increases payor control over the bill payment process and standardizes the interface between the payor and multiple payees thus significantly reducing or eliminating the financial and operational interaction between a payor and each payee. In addition, there is a need for a system to eliminate the necessity for multiple payees to make delivery of their respective bills to consumer payors and to allow the possibility of single delivery of bills from multiple payees to a payor.